PALM BEACH, Fla. - Most of the more than 50 compliance lawyers who converged here last week on The Breakers, a steamy oceanside resort, wore bright clothing instead of business suits. But the issues contemplated during the three-day seminar put on by CFI Proservices were anything but casual.
Hot topics included figuring how states will react to the Riegle-Neal Interstate Banking and Branching Efficiency Act; whether a bank's internal evaluation of its compliance performance is protected; and how the Community Reinvestment Act should apply to Native American reservations.
CFI Proservices, based in Portland, Ore., is a compliance software company that keeps up with state regulatory changes through a network of lawyers in all 50 states.
President Robert P. Chamness, himself a lawyer, said CFI's network of lawyers gives it an edge in the industry by keeping the company abreast of impending regulatory changes.
The Riegle-Neal law enacted last year dominated many of the sessions as states prepare for the Sept. 29 onset of interstate banking. Interstate branching becomes legal June 1, 1997.
Reaction to the act proved to be anything but uniform.
Attorneys from Pennsylvania and Oregon said their state would "opt in" and allow out-of-state banks to branch into their states before June 1997. Dan Nicewander, a lawyer with Gardere, Wynne in Houston, said Texas would opt out of interstate banking. Other states weren't quite as cut-and-dry in response.
For example, Richard Olson, a lawyer with Olson, Burns, Lee & Larson of Minot, N.D., said interstate banking in his state was prohibited by statute and would be phased in slowly. No changes will be seen until August 1996, when banks will be able to move freely throughout the state. In May 1997, the state will allow out-of-state banks to enter.
Montana has accepted interstate banking but will not let out-of-state banks establish branches within the state.
Colorado will allow expansion into the state in June 1997, but acquirers must buy the whole bank, not just a branch or two.
Defining a bank's "location" and what amounts to "interest" - crucial terms in interstate banking - caused much debate at the conference.
"Interest" ought to be interpreted broadly to include all bank charges, including credit card late charges, said Alan Kaplinsky, a lawyer with Ballard, Spahr, Andrews, & Ingersoll in Philadelphia. National banks want the flexibility to charge fees allowed in the state where they are headquartered, where a branch is located, or where a service is provided.
Once the definition for interest is determined, how location is defined becomes important. National bankers want location to be defined as the state designated in a bank's organization certificate as well as where it has branches, Mr. Kaplinsky said.
In a move to encourage banks in their states keep a better eye on their own compliance efforts, Illinois and Oklahoma have passed laws that essentially protect institutions from incriminating themselves.
New laws state that documents revealing the results of internal compliance reviews by a bank are confidential and do not have to be provided to investigators, even if they are subpoenaed.
"This law creates a privilege letting banks set up committees to do internal audits without the fear they might eventually be used against them," said Tom Karaba, a partner at Crowley, Barrett, & Karaba, Chicago.
South Dakota and Wisconsin lawyers expressed concerns about CRA lending to Native Americans on reservations in their states.
The reinvestment law includes reservations in banks' "communities," so banks have a compliance incentive to lend in them.
However, the borrowers "live in a vacuum where federal and state rules don't apply," said Charles D. Gullickson, a lawyer with Davenport, Evans, Hurwitz, & Smith in Sioux Falls, S.D. That makes it difficult to collect on bad loans, he said.
James Sheriff, a lawyer with Godfrey & Kahn in Milwaukee, said the problem is the same in Wisconsin.
"The tribe is considered to be a separate nation within our state," Mr. Sheriff said.
Wisconsin officials have apparently decided that four state regulatory agencies are three too many.
State agencies regulating banks, savings associations, mortgage bankers, and credit unions are being merged into the new Department of Financial Institutions. The merger plan, included in the budget law signed in July, won't be fully effective for five years.
The award for least-relevant rule change discussed at the conference would have to go to the Nebraska law that states "real property instruments submitted to the register of deeds for recording must contain a blank space of at least two-and-one-half inches by six-and-one-half inches at the top of the first page."